RTS Analysis

Set out below is a summary of the analysis and conclusions drawn from SFM’s detailed monitoring of the quality of execution obtained on the execution venues where we executed client orders in the previous year. SFM carries out the service of investment management and places orders with other entities for execution. SFM does not execute client orders directly against an execution venue. References to ‘venue’ in this report refer to the broker with whom orders are placed for execution.

Requirement under Article 3(3)

Response

a) an explanation of the relative importance the firm gave to the execution factors of price, costs, speed, likelihood of
execution or any other consideration including qualitative
factors when assessing the quality of execution

SFM continually strives to take all sufficient steps to obtain the best possible result for clients, considering all execution factors. The relative importance of each execution factor may vary for each trade.
Price is often the main factor, along with likelihood of execution. Price means the gross price i.e. including charges levied by the execution venue.
SFM seeks to minimise execution costs by negotiating commission costs but only to the extent that it does not impact the level of service provided. The cost of using an execution venue varies depending on the service being provided and the characteristics of the financial instrument.
Speed depends on the circumstances of the client e.g. a requirement to fund redemptions, and the time at which the order is placed e.g. the number of trading hours remaining before the market close, but will typically be subordinate to price. Prioritising speed could be detrimental to price but occasionally may be necessary due to circumstances.
When placing orders for execution the choice of venue will largely depend on the characteristics of the financial instrument, e.g. jurisdiction.
A dilution levy charge may also be applied, depending on the size of the order. Before instructing an order, SFM will try to obtain an understanding as to the probability of whether a charge will be levied. If this is the case, SFM will assess whether the order may be split into several smaller orders over a longer period. Consideration will be given to the client’s circumstances and the current market environment.

b) a description of any close links, conflicts of interests, and common ownerships with respect to any execution venues used to execute orders;

SFM does not have any close links, conflicts of interests or common ownerships with
respect to any execution venues used to execute orders.

c) a description of any specific arrangements with any execution venues regarding payments made or received, discounts, rebates or non-monetary benefits received;

SFM does not have any arrangements with any execution venues regarding payments made or received, discounts or rebates.

d) an explanation of the factors that led to a change in the list of execution venues listed in the firm's execution policy, if such a change occurred

No changes occurred in the year in question.

e) an explanation of how order execution differs according to client categorisation, where the firm treats categories of clients differently and where it may affect the order execution arrangements;

SFM only currently only executes orders for professional clients

f) an explanation of whether other criteria were given precedence over immediate price and cost when executing retail client orders and how these other criteria were instrumental in delivering the best possible result in terms of the total consideration to the client;

SFM does not execute orders for retail clients

g) an explanation of how the investment firm has used any data or tools relating to the quality of execution, including any data published under Delegated Regulation (EU) 2017/575 [RTS 27];

All brokers that SFM uses to place client orders for execution must agree to provide best execution and provide a copy of their best execution policy before we will add them to our approved broker list. SFM monitors the quality of execution regularly to ensure this is being achieved. Consistently failing to provide best execution may result in a broker being removed.
For the year ended 31/12/2017, the quality of execution obtained from the execution venues used to place client orders for execution was monitored by comparing data obtained on the execution factors for each trade executed against performance criteria set by SFM. The fund managers also assess the quality of execution provided by the broker on receipt of confirmation of each trade.
SFM will continue to monitor the effectiveness of its Order Execution Policy and arrangements at least annually (and whenever any material changes are proposed) to identify, and where appropriate, correct any deficiencies.

h) where applicable, an explanation of how the investment firm has used output of a consolidated tape provider established
under Article 65 of Directive 2014/65/EU.